Credibility of government policy: Lessons for economies in transition

Reforms have to be credible in order to fully reveal the intended positive effects. This important lesson for economies in transition is illustrated by recent experiences in developing countries. The following article discusses several possible ways of enhancing credibility. This paper reports research undertaken in the project “The Role of Stabilization, Liberalization and Privatization in the Process of Transformation in Central and Eastern Europe”. Financial support provided by the Volkswagen Foundation is gratefully acknowledged. I thank Peter Nunnenkamp for helpful comments on an earlier draft.